Government Discord Derails Massive European Merger

A deal to create the world's biggest aerospace company, three months in the making, died in a three-minute phone call.

On Tuesday night, after days of intense negotiations among European government officials and executives over the proposed merger of Airbus parent European Aeronautic Defence & Space Co. and British defense giant BAE Systems PLC, German Chancellor Angela Merkel called French President François Hollande. Ms. Merkel told Mr. Hollande that Germany believed the deal's negatives outweighed its benefits for...